Airbus ups the ante in U.S.

The foreign firm vows to build commercial jets in the States if it beats Boeing for an Air Force contract.

The competition for the Pentagon's biggest contract in years intensified Monday as European aircraft maker Airbus said it would assemble commercial jets in the U.S. if it won the $40 -billion award to build aerial refueling tankers for the Air Force.

The announcement marks the latest effort by Airbus and its partner Century City-based Northrop Grumman Corp. to upset rival Boeing Co. to build the planes that would be used to refuel fighters and bombers in midair.

Boeing, based in Chicago, is considered the favorite after having won the initial contract that was overturned in the aftermath of a Pentagon procurement scandal several years ago that led to jail for an Air Force official and a Boeing executive.

The latest contract calls for building 179 tanker jets for $40 billion, but the potential value could rise to at least $100 billion with prospects for additional orders.

With so much at stake, the Airbus pledge to build not only tankers but also commercial planes in the U.S. is likely to raise the political stakes in what has already been one of the more hard-fought Pentagon contract competitions.

"This is really about Congress and the political fight that is coming regardless of who wins," said Scott Hamilton, an aviation consultant in Issaquah, Wash.

A winner could be picked as early as Jan. 31, but analysts anticipate a protracted battle in Congress, which could withhold funds to buy the planes if the majority is not happy with the selection.

The competition has already split Congress along regional lines, with Southern politicians pushing the Northrop-Airbus bid and politicians in the Northwest calling for a Boeing win.

The Northrop-Airbus plane would be assembled in Mobile, Ala., and Boeing's jet would be built in Everett, Wash.

Airbus has proposed a modified version of its A330 passenger jet for the tanker, and Boeing is offering a modified 767 aircraft.

Airbus said that if it won the contract, it would assemble its commercial cargo version of the A330 on the same line as the tanker, an economic boon for Alabama and the surrounding region. It would mark the first time that the Toulouse, France-based aircraft maker would assemble planes outside Europe.

Winning the contract could have a bigger effect on Airbus than on Boeing, Hamilton said. Airbus, hit by costly delays with its marquee A380 super jumbo jet and other financial woes, needs the cash flow from the tanker deal to fund development of other commercial planes such as the A350 to compete with Boeing, Hamilton said.

In addition to helping gain political support in the U.S., the move to assemble commercial planes in Alabama could help alleviate the company's monetary woes with the weakening dollar. Though based in Europe, Airbus sells planes in U.S. dollars but pays for parts and wages with the stronger euro.

Airbus, a subsidiary of European Aeronautic Defense & Space Co., said it would hire 1,000 workers in Alabama to build the tanker. It would add 300 more to the factory line to build the commercial cargo planes.

In all, Northrop and Airbus said about 25,000 people in 49 states would be involved in building the tanker, and Boeing said its program would support 44,000 jobs, most of them employed by subcontractors.